What is an Amortization Schedule?

When you make a mortgage payment, the payment is actually split into two payments:

• Interest, which is the amount you pay to borrow the money for your mortgage
• Principal, or the actual amount of money you'll borrow to purchase your home

The amount of your mortgage payment that goes to either the interest or the principal varies over the life of the loan. Typically, early payments go mostly to interest. Usually, the amount that goes to interest decreases over the years, while the amount that goes toward your principal increases. This is how you build equity in your home (along with increases in equity when your house appreciates in value over time)!

An amortization schedule is simply a chart that shows how much of each mortgage payment is allocated to interest and the principal. See a sample amortization schedule below.

Sample Amortization Schedule